QUALCOMM, Inc. (NASDAQ:QCOM) and Broadcom Corporation (NASDAQ:BRCM) are competitors in the communications technology market, and the duo go head-to-head in a variety of arenas. For example, a few weeks ago, ABI Research's Global Navigation System (GNSS) Integrated Circuit (IC) vendor matrix established that the companies were the top two GPS IC manufacturers among the 15 surveyed, with QCOM holding the edge.
From a technical perspective, QCOM possesses a solid advantage, as well. The San Diego-based company has advanced nearly 16% year-over-year to $68.39, and is well within striking distance of its 13-year high ($70.37) touched on Sept. 10. By contrast, BRCM has shed roughly 15% during the past 12 months to $26.98, and tagged a four-year low of $24.60 just last week. Although the firm has rebounded in the past few sessions, it's now staring up at its 80-day moving average, which has acted as a ceiling since mid-July.
Despite on-chart performance clearly favoring QCOM, it's actually BRCM that has won over the bullish speculators. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the semiconductor name shows a 10-day call/put volume ratio of 5.41, meaning calls bought to open have outnumbered puts by more than a 5-to-1 margin during the previous two weeks. The ratio ranks in the 79th percentile of its annual range, too, conveying traders are scooping up long calls over puts at a faster-than-usual pace. By contrast, QCOM's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.20 ranks higher than just 34% of similar readings recorded in the last 52 weeks. Long story short, option bears have been more active than normal of late.
The sentiment disparity between the two companies grows even wider as the time frame lengthens. Broadcom's 50-day call/put volume ratio at the ISE, CBOE, and PHLX stands at 4.62, which is just 12 percentage points from an annual acme. In other words, traders have rarely targeted calls (relative to puts) with the rapidity they have during the past 10 weeks. In light of the shares' technical struggles, however, this group of bulls may be on the brink of hitting the exits, which could create some contrarian headwinds for the stock going forward.
Meanwhile, QUALCOMM's 50-day call/put ratio is 1.74, just 6 percentage points from a 12-month nadir. In contrast to the preceding paragraph, this actually means option traders have heavily favored puts rather than calls during the past couple months, relatively speaking. Nevertheless, if the shares can sustain their upward trajectory, an unwinding of these bearish bets could push QCOM even higher.
Moving on to the brokerage bunch ... QCOM is actually better supported than BRCM. However, the difference isn't as stark as one might guess, based on the competitors' diverging historical performances. For starters, QCOM boasts 20 "strong buy" ratings and one "buy," compared to just five "holds" and not a single "sell" or worse recommendation. Meanwhile, BRCM has received 22 "buy" or better endorsements out of 34 total evaluations -- pretty notable for such a long-term laggard. Suffice it to say, a round of downgrades could be on the horizon for the underperforming stock, which could sink it further.
In conclusion, although QUALCOMM, Inc. (NASDAQ:QCOM) and Broadcom Corporation (NASDAQ:BRCM) may appear quite similar to the casual observer, they are distinctly positioned as far as contrarian trading opportunities go. Specifically, QCOM seems primed to benefit from a potential reverse-course among pessimistic option traders, while BRCM looks set up for a swoon, as the various types of bulls re-evaluate the shares and change their respective tunes accordingly.
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